Sri Lanka’s construction sector is expected to demonstrate resilience compared to other economic sectors largely due to the existence of sufficient projects, reasonably priced raw materials and funding, a report by ICRA Lanka said yesterday, but warned profitability will moderate due to lockdown and new projects will be less in the medium term.
Sri Lanka’s economic activities had slowed down during Q1 of 2020 and the economy is expected to contract by 4.5% in Q2 as per ICRA Lanka’s assessment, amidst the outbreak of the COVID-19 virus.
At the business entity levels, the ability of some construction companies to withstand the effects of COVID-19 pandemic will depend on several factors such as duration and severity of the pandemic, parent company support, the Government’s policies, and availability of additional capital buffers.
Notwithstanding the relief package introduced by the Government, ICRA Lanka expects the disruption to have some impact on the operating income, profitability, and liquidity position of the construction companies in the short term (especially during the lockdown period). However, this sector is expected to demonstrate resilience compared with other economic sectors of Sri Lanka.
(FT)